What is Beauty Bungalows' policy regarding cash held in accounts exceeding insured limits?
Beauty_Bungalows Franchise · 2025 FDDAnswer from 2025 FDD Document
Cash and cash equivalents include all cash balances on deposit with financial institutions and highly liquid investments with a maturity of three months or less at the date of acquisition. The Company maintains its cash in bank deposit accounts which could exceed federally insured limits. The Company has not experienced an instance where cash held in the account exceeded insured limits since its inception and has not had losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Beauty Bungalows' 2025 Franchise Disclosure Document, the company maintains its cash in bank deposit accounts, which could exceed federally insured limits. The document states that Beauty Bungalows has not experienced any instances where cash held in the account exceeded insured limits since its inception, and the company has not had losses in such accounts. Because of this, Beauty Bungalows believes it is not exposed to any significant credit risk on cash and cash equivalents.
For a prospective franchisee, this indicates that while Beauty Bungalows' cash management practices could potentially involve holding amounts exceeding the standard FDIC insurance limit of $250,000, the company has not encountered any issues related to uninsured cash balances. This suggests that Beauty Bungalows has been careful in managing its cash deposits to avoid losses.
However, franchisees should be aware that there is always a potential risk when holding cash above insured limits. While Beauty Bungalows believes it is not exposed to significant credit risk, unforeseen circumstances could arise. It would be prudent for a prospective franchisee to inquire about the specific banks Beauty Bungalows uses and the measures taken to mitigate risks associated with uninsured deposits. Understanding the company's risk management strategies related to cash holdings is an important part of assessing the financial stability of the franchise system.